DoorDash will pay $16.8M in settlement over tips taken by company, New York Attorney General Letitia James says

New York Attorney General Letitia James’ office reached a nearly $16.8 million settlement with the food delivery service DoorDash to repay drivers whose tips were shortchanged by the company over a four-year period.

James announced the settlement Monday afternoon that will pay drivers, known as "Dashers," $16.75 million in owed pay and DoorDash must pay up to $1 million in settlement costs to issue the payments.

The payments owed to drivers will range from $10 to $14,000 depending on length of service, James said.

James said DoorDash used customer tips to offset guaranteed pay to workers between May 2017 and September 2019. Dashers were able to see how much they would be paid before accepting a delivery, but they could only see their tips if they were more than the guaranteed rate, she said.

James called it a "bait and switch," for customers who thought tips were supporting drivers, but instead were subsidizing worker pay for the company. 

"Under DoorDash's deceptive pay model, these Dashers never received the tips they were entitled to," James said Monday. "Customers had no reason to believe their tips were being used to reduce [the company's] own costs. DoorDash had full knowledge of these issues. They knew it wasn’t right and they did it anyway."

DoorDash company officials said the tipping method was under a former model used until 2019. They said the company "properly represented how dashers were paid during that period." The company said it has changed its payment method to separate tips from guaranteed pay.

"We remain committed to making sure that Dasher earnings are always fair and transparent, and the allegations settled were related to an old pay model that was retired in 2019. To be clear: Dashers always keep 100% of tips from orders on the DoorDash app," the company said in a statement.

Under the former tipping model, their tips may have been shortchanged depending on how much in tips drivers received to fulfill the guaranteed rate, according to the attorney general’s office. Workers received a minimum $1 payment and the company would use the remaining tips to offset pay owed, according to the office.

"Customers were misled into believing their tips would directly benefit Dashers," James' office said in a news release. "Instead, DoorDash would keep the tips meant for Dashers and take it out of their guaranteed pay. DoorDash would guarantee pay to a delivery worker, and then only actually pay them whatever the tip did not cover."

New York officials said the company failed to disclose the payment method to customers and drivers. They said that the tipping disclosure was listed in fine print online and not shown during online ordering. Customers were given a message encouraging them to tip beneath a message that read, "Dashers will always receive 100% of the tip," while state officials allege the company was using a portion of tips to reduce costs of paying drivers.

Under the settlement, any worker from May 2017 to September 2019 may be eligible to file a claim. During that period, there were more than 11 million DoorDash delivery orders statewide by an estimated 63,000 delivery drivers.

The attorney general’s office said restitution payments will begin in the coming months to eligible drivers contacted by the settlement administrator by mail, email, or text message, with information on how to file a claim. A website will also be established to submit claims.

The settlement also requires DoorDash to maintain a payment model to pay tips entirely and enhance transparency to drivers and customers, including showing base pay, bonuses and tips for each delivery.

Drivers will also have access to their delivery history for at least four years, according to the settlement.

By John Asbury

john.asbury@newsday.comJohnAsbury

John Asbury is a breaking news and general assignment reporter. He has been with Newsday since 2014 and previously worked at The Press-Enterprise in Riverside, California.